Why hasn’t eCommerce taken off in the Middle East?
Zayn Alam is a Inventory Coordinator at Linio - Mexico and originally hails from India but has lived his entire life in the Middle East. Linio is an eCommerce website that caters to the South American market. For more information on Linio click here.
Zayn Alam speaking at NIT Trichy (Image Courtesy Facebook)
eCommerce is quickly replacing the services of many Brick and Mortar stores. This is now emerging as universal phenomena especially in markets where transportation and storage of commodities is expensive or impractical. However one of the few regions in the world where eCommerce hasn’t found much success is the Middle East. Along with insight from Zayn Alam from Linio, we shall look into why this is the case.
Focusing on the United Arab Emirates, a few web retail websites do exist such as souq.com, perhaps most notorious for its vaporware deals. The giants such as Amazon and eBay however don’t. Additionally, the number of people who shop online in the Middle East is very low compared to the rest of the world. Why is this the case? Zayn explains:
“Existing eCommerce Portals in Middle East Don’t provide items at competitive rates compared to retail stores. So why would someone want to pay the same amount plus delivery charges which can be gotten from millions of department stores.”
A quick search on souq.com shows you why; an iPhone 5s costs the same on the website as compared to buying it from a brick and mortar store such as Axiom. In this instance, you even get a batter deal in Axiom with the option of a Smart band i.e. a Fitness Tracker. The primary reason for this is that shipping in the Middle East is still an expensive prospect. While day couriers do exist, during import transportation of electronic good or other fragile objects warrants the necessity to insure the courier.
This additional cost is borne by the customer. Therefore in addition to the already substantial warehouse fees and server overheads, the customer is required to borne the expense of shipping. This problem can be alleviated by increasing the in country inventory, which would bring down shipping costs and customs costs. A greater investment in inventory management would be required and perhaps additional warehouses would have to be purchased.
But what does the future hold for eCommerce in the Middle East? We asked Zayn; What would happen to brick and mortar stores with the continued growth of eCommerce.
“The allure of glitzy malls and glamorous nights out shopping will never cease in the Middle East. It is now part of the culture. The touch and feel of a carefully designed store showing products cannot be matched by any online retail experience. This itself is one of the reason why tourists flock to Dubai. The grandiose malls and the festive atmosphere far beats the convenience of online shopping”
Perhaps this is the primary reason for the slow growth this side of the world. The market culture is too strong to let go. From the ancient spice and carpet markets during the days of the silk route to Dubai building the world’s largest mall that is Dubai Mall, eCommerce still has a long way to go to provide the same experience.